Is Our Unemployment 'Structural'?

by: Brad DeLong

Ryan Avent writes (Free exchange):

MY CRUSADE for a more sophisticated discussion about the American labour market seems to be falling short of its goals. Lawrence Mishel released a note yesterday entitled, "Debunking the theory of structural unemployment", which concluded:

Widespread claims that our unemployment crisis is structural are not only inaccurate, but they imply that macroeconomic tools such as fiscal policy (spending or tax cuts) or monetary policy can not address our unemployment crisis. Surprisingly, perhaps amazingly, there’s no systematic empirical evidence for such assertions. Policy makers should understand that the problem faced by the unemployed is a simple scarcity of jobs...

Sigh. First of all structural unemployment isn't a "theory" to be "debunked"...

He misreads Larry: the "theory" to be debunked is the theory that our current unemployment is structural, and thus that standard expansionary macroeconomic policy tools would not be effective. And, indeed, that is what those who are saying that our current unemployment is structural are claiming: that standard expansionary macroeconomic policy tools would not be effective.

So when Ryan writes:

Contrary to most of the people poo-pooing the structural side of things, structural unemployment does not imply that government should do nothing...

He should be writing:

Contrary to most of the people pushing the importance of the structural side of things, structural unemployment does not imply that the government should do nothing...

The overwhelmingly likely possibility is that at the moment little of our unemployment is "structural," but that if demand is not boosted to reduce cyclical unemployment that it will turn into structural unemployment and then be with us for a decade or more. The fact that cyclical unemployment turns into structural unemployment is a possibility that adds immense urgency and power to the case for more demand stimulus right now.

Yet that is not what Ryan Avent concludes. Instead he reaches for the "plague on both your houses" journalistic trope:

Policymakers have become less interested in knowing what problems need solving and more interested in knowing how best to sell the policies they'd like to enact. Republicans don't want to enact stimulus, but wouldn't mind cutting taxes, cutting the minimum wage, and rolling back other labour rules. Democrats may want to enact more stimulus, but they also remain interested in other programmes that are likely to boost spending (in practice, it's hard to know what "Democrats" want—the caucus is hardly speaking in unison right now). And so the polarised policy discussion sources itself in a polarised analysis of current conditions. And if you care to influence this policy debate, you have to speak in polarised terms. Policy is explicitly zero-sum. If you acknowledge structural unemployment, you strengthen the Republican policy argument and weaken the Democratic policy argument.... [S]ome prominent economic writers appear to have so internalised the polarised method of argumentation that they no longer recognise they're doing it. It comes naturally, even when discussing issues that haven't necessarily been wedged into the polar, partisan dynamic.

It's unfortunate, and frustrating, and disappointing. But I don't know that anything can be done about it.

What Ryan could do is say that the fact that some of our unemployment may be structural and a lot more is likely to become structural makes the Republican policy stance not just stupid and destructive but insane and catastrophic.

That would advance the debate...